Buying a Vacation Home

Buying a second home, also considered a vacation property, is a great option for people who want a place to relax from their primary residence or are looking for a long term investment. However, the mortgage process for buying a second home may be different compared to when you purchased your first home. For example, the loan options and rates when buying a vacation home could be different compared to a first time home buyer. These differences are to be expected to insure that the buyer can reasonably afford purchasing a second mortgage.

Buying a Vacation Home Considerations

When deciding to purchase a vacation home, take a look at some important considerations:

  • Will this vacation home be used by you and related family? Are you going to rent out the home while you are away?
  • Are there any existing damages or renovations that need to be done? Is the home fully furnished or do you have to buy new furniture?
  • Can you manage an additional home? Are your monthly income and other sources of income sufficient given your current and future financial responsibilities?
  • Like any major purchase you will need to consider financial responsibilities outside the mortgage like homeownersí association, insurance, maintenance costs, utilities, cleaning and repair service, etc.

Given these factors, NationsChoice Mortgage has many popular financing options and loans that you can consider when buying your next vacation home.

Cash Options for Second Mortgages

If you have enough cash reserves to purchase a second home, then this is a viable option. However, for many people this option ties up a large portion of financial reserves and may jeopardize future repairs, unforeseen costs, or hardships with the new vacation home. There are several options that may still be appealing for those cash buyers. For example, putting a large deposit or cash down will help give you leverage with finding the best financing option and may even give you points to use towards lowering your rates and mortgage payment. Please contact NationsChoice Mortgage to discuss these options and how we can help make your money go further without hurting your cash reserves.

Home Equity Loan Options for Second Mortgages

The home equity loan is ideal if you have a significant amount of home equity on your existing property. Some mortgage investing experts find this a very appealing option to consider. This mortgage option allows you to leverage the existing home equity from your primary home to leverage some or all of the costs for your vacation home. Having enough home equity to pay to buy a vacation home may be a more feasible than you think. Nations Choice Mortgage can help you find the value of your home and determine how it can help you with purchasing your next vacation home.

Second Mortgage Conventional Loan Options

There are many conventional loan types that are also available for purchasing a vacation home that are very similar to when you purchased your first home. Often there are subtle differences like a slightly larger down payment may be required and depending on your credit score it can impact the mortgage interest rates and your monthly payments. These factors can be expected with a second mortgage and should be factored into your budget. There are several conventional loan options that are available and we recommend you speak to a loan professional at Nations Choice Mortgage to get more details about which programs will apply to you.

Using your Second Mortgage as a Rental Property

If you plan to use your second home as a rental property you will need to consult NationsChoice Mortgage loan professional about our mortgage options and what we allow or do not allow for rental properties. In todayís market, lenders have different options and restrictions when it comes to renting the second home. Often, if you find a lender willing to give you a second mortgage for a rental property they will be a bit stricter with the mortgage options and the rates may be slightly higher compared to a vacation home for personal use.

Making Loan Preparations

Getting a loan to buy a second home requires some money management and preparation. First, you have to look into your credit score. Ideally, your credit score would be 720 or above. Donít let this credit score limit your view on obtaining a second mortgage. If you are not currently within that range, there are options that you can evaluate to overcome this obstacle. Third party partners can be used to help boost your credit score and increase your financial profile.

Another aspect to consider is your debt to income ratio. To put simply, a ratio is used to calculate your annual salary against your actual debt. If this ratio falls within the guidelines then you have a good chance for a loan. If your ratio is slightly outside of the acceptable guidelines then there still may be options to lower your fixed debt. If you have financial reserves you may need to have documentation of all your assets and income so that the lender can help factor all of the financial factors into the loan.

Make a financial plan of action. Your objective is to know your financial condition, your borrowing capacity and credit limitations.

  • Read your credit history and assess if there are discrepancies.
  • Do you have actual money to pay for a down payment and still live the same lifestyle you are living now or would like to live in the future?
  • Calculate the amount of money you have to pay for the home as well as other costs. What is the value of the home and total cost of ownership? Do you need to borrow the entire cost of the loan or only a small percentage? The overall cost to consider would be the down payment and closing costs if you want to get a loan for the second home.
  • Manage your payment strategies and create a reserve to make sure there are never any late payments on your primary or secondary mortgages.
  • How much are you going to spend for the property and mortgage payments? A mortgage calculator can be used to do this more accurately. Given that amount, are you ready to add that to your existing payables?

Buying a Vacation Home Conclusion

Financial planning is a key aspect when getting a loan for a second home. A second home is a fitting option for those who have acquired new sources of income, are done or almost through with their original mortgage or if they are planning on taking investments through properties. Like any type of investment there are risks that need to be planned and prepared for but if done correctly, the benefits of having a second mortgage for a vacation home or investment property are notable.

When considering these options it is always best to speak with a specialist at Nations Choice Mortgage. We can help you look into each of these options in more detail and make sure that you have all the information to make an informed decision.

How to Buy a Vacation Home:

If you are considering buying a vacation home, Nations Choice Mortgage can help you begin the process of applying for a loan. Nations Choice Mortgage has a well-trained team of mortgage specialists that are always available to help you make the best decision with your mortgage-related needs. We understand that choosing the right type of mortgage for your needs is a big decision and we are always here to help you make an informed choice.

To begin applying for a second home loan all you need to do is search rates and you will receive a personalized interest rate quote. You can then choose the type of loan and interest rate which fits your needs best. Your mortgage application can also be completed online using our advanced online mortgage application. If you have questions anytime during the online application process, feel free to contact us and we will provide you with all the information you need.

Instant Mortgage Rate Help

Loan Amount: How much do you want to borrow? Example: 150,000 (You can borrow up to 100% of the purchase price of your home. You will find better interest rates at 95%, 90%, and 80% progressively.)

Property Value: This is the purchase price of your property or your best estimate of the appraised value of the property. Example: 175,000.

Loan Type: Selecting Refinance WITH CASH OUT may increase your rate. If you want some extra cash to pay the closing costs on your new loan, this would NOT be considered receiving extra cash.

Escrow/Impounds: Allows you to pay 1/12 of your annual property taxes and homeowners insurance with your mortgage payment each month. Escrowing your taxes and insurance will lower your points by .25%

Property State: Specify the State where the property is located

Property County: Specify the County where the property is located


Todays Rates: These rates are based on the following criteria..

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